When your computers, machines and other equipment work properly, your business runs smoothly. But what happens when a vital piece of equipment breaks down? You're stuck while the equipment or wiring is repaired or replaced. During that time, you typically have to pay for the servicing and you may even lose revenue as your business grinds to a halt. Business equipment insurance eliminates that risk by covering your equipment repair costs and reimbursing you for lost income.
Business equipment insurance, also called equipment breakdown insurance, is a necessity in this technological age. Whether you are a freelance graphic designer with a computer setup that costs thousands of dollars or a manufacturer that has millions of dollars worth of equipment, if your equipment breaks down your business most likely grinds to a halt as well.
Equipment breakdown insurance covers a wide range of disruptions, such as:
- The convenience store that loses a refrigeration unit
- A business office complex that has a power failure
- A hospital breaks a piece of high-use diagnostic equipment
- A web-based enterprise whose servers are damaged
The specific policy will depend on the insurance company that provides your coverage and how that company structures your equipment breakdown insurance policy. But typically this coverage will protect your business financially for anything from a machine failure caused by power surges to power failures to burned-out motors or even operator errors.
Many business owners cannot afford to close their businesses down for a day or two, let alone for weeks or months. Here are some of the businesses that can benefit from a business equipment insurance policy.
- IT, computer hosting and data back-up companies
- Hospitals and medical facilities
- Manufacturing companies
- Convenience stores
- Restaurants and fast food places
- Hotels, inns and spas
- Retail stores
- Apartments and condos
- Churches and religious organizations
- Office buildings
- Automobile repair shops
- Dental and doctors offices
- Shopping centers and malls
Equipment breakdown insurance, sometimes called boiler and machinery insurance, typically covers the following equipment-related issues:
- Pays to fix or replace failed equipment
- Reimburses for labor and time costs to fix or replace failed equipment
- Replaces lost business income due to equipment failure that leads to business stoppage
- Covers other costs to minimize losses or to get equipment working and productive faster
- Reimburses for loss of materials or related goods, such as spoiled food, due to equipment shut down
If you lease all of your critical equipment, you have a certain amount of protection from equipment failures such as electrical malfunction. Presumably, your building landlord, equipment supplier or customer support team will service that equipment and get you back up and running as soon as possible.
However, even if you are not responsible for repairing the leased equipment, you still need business equipment insurance. Here's why. While your service provider may be responsible for fixing the equipment or machinery that's down, they will not reimburse you for lost income during the business interruption.
Equipment coverage goes a big step beyond just getting your equipment running again; it covers lost income and operating expenses during the shut down.
While equipment warranties do provide some protection, there are limitations. For example:
- They normally limit their coverage to specific time frames and causes of equipment breakdown.
- Manufacturer's warranties exclude operator error as a covered cause.
- The warranty will not reimburse you for any business income loss while equipment is down or being repaired.
Also, some equipment owners wrongly assume that their property insurance covers their equipment. Typically, this is not the case unless you add an equipment breakdown and business loss endorsement to the policy.